Thompson, who initially joined Leeds on loan from Celtic in January 2007 and completed a permanent transfer last summer, was beset by injury problems during the 2007-08 season and made his final appearance for the Whites at Swindon Town on March 1.
He was not involved in any of the club's play-off games and moved today to confirm his retirement at the age of 34.
Thompson said: "I've had a good career but I've decided to call it a day. I'm going to take a bit of time out now but I would like to stay involved in the game."
The Newcastle-born player was named as Dennis Wise's captain in August but made only 14 appearances for Leeds and was sent on loan to Hartlepool United in January.
He played once under Gary McAllister and was widely expected to end his career following the defeat in the League One play-off final at Wembley on Sunday.
It is anticipated that Thompson will take up a coaching role at Newcastle United, where Wise is now director of football.
Thompson said: "It's been enjoyable. I had hoped to have played more of a part, and it was disappointing to finish on a low at Wembley on Sunday."